FEDEX CORP - FORM 8-K - EX-99.1 - September 18, 2013

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8-K - 8-K - FEDEX CORP	d599842d8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

FedEx Corp. Reports Higher Year-Over-Year

First Quarter Results

FedEx Express Announces 2014 Rate Increase

MEMPHIS, Tenn., September 18, 2013 ... FedEx Corp. (NYSE: FDX) today reported earnings of $1.53 per diluted share for the first quarter ended August 31, compared to $1.45 per share last year.

“Growth in overall demand for our broad global portfolio of solutions drove our improved first quarter results,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “FedEx Express remains focused on reducing costs while facing challenging global economic conditions. Meanwhile, FedEx Ground continues to generate strong profitability on growing customer demand for its services.”

First Quarter Results

FedEx Corp. reported the following consolidated results for the first quarter:

•

Revenue of $11.0 billion, up 2% from $10.8 billion the previous year

•

Operating income of $795 million, up 7% from $742 million last year

•

Operating margin of 7.2%, up from 6.9% the previous year

•

Net income of $489 million, up 7% from last year’s $459 million

Revenue and earnings increased during the quarter, driven by solid performance at each of the company’s transportation segments. Results include significant headwinds from the net year-over-year impact from the timing lag that exists between when fuel prices change and indexed fuel surcharges automatically adjust, as well as one fewer operating day.

Outlook

FedEx reaffirmed its forecast of full-year earnings per share growth of 7% to 13% from last year’s adjusted results. This outlook assumes the market outlook for fuel prices, U.S. GDP growth of 2.1% and world GDP growth of 2.6%. The capital spending forecast for fiscal 2014 remains $4 billion.

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“We remain confident in our full year earnings outlook despite tepid global economic growth,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “FedEx Express continued to execute on its profit improvement initiatives during our first quarter. We remain focused and are committed to FedEx Express achieving its $1.6 billion operating profit improvement target by the end of fiscal 2016.”

2014 Rate Increases

FedEx Express will increase shipping rates by an average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 6, 2014. The FedEx Ground and FedEx SmartPost pricing changes for 2014 will be announced later this year. FedEx Freight implemented a 4.5% general rate increase on July 1, 2013.

Details of changes that will be made to FedEx Express surcharges can be found at fedex.com/us/2014rates.

FedEx Express Segment

For the first quarter, the FedEx Express segment reported:

•

Revenue of $6.61 billion, down slightly from last year’s $6.63 billion

•

Operating income of $236 million, up 14% from $207 million a year ago

•

Operating margin of 3.6%, up from 3.1% the previous year

Revenue decreased due to lower fuel surcharge revenue and one fewer operating day. U.S. domestic average daily package volume increased 1% while U.S. domestic revenue per package was essentially flat, as higher rate per pound and weight per package were offset by lower fuel surcharges. FedEx international export average daily volume grew 4% during the quarter, as FedEx International Economy grew 15% while FedEx International Priority slightly declined. International export revenue per package fell 4% primarily due to lower fuel surcharges, lower rates and the demand shift to lower-yielding international services.

Operating income and margin growth were constrained by the significant net negative impact of the fuel surcharge timing lag and one fewer operating day. Despite these constraints, operating results improved due to better base U.S. business performance and lower pension expenses. The continued modernization of the company’s aircraft fleet drove maintenance costs lower, partially offset by higher related depreciation expense.

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FedEx Ground Segment

For the first quarter, the FedEx Ground segment reported:

•

Revenue of $2.73 billion, up 11% from last year’s $2.46 billion

•

Operating income of $468 million, up 5% from $445 million a year ago

•

Operating margin of 17.1%, down from 18.1% the previous year

FedEx Ground average daily volume grew 11% in the first quarter due to continued growth in both FedEx Home Delivery and commercial business services. Revenue per package increased 1% due to increased rates and higher residential surcharge revenue, partially offset by lower fuel surcharges. FedEx SmartPost average daily volume increased 26% primarily due to growth in e-commerce. FedEx SmartPost net revenue per package decreased 5% due to increased postage rates and lower fuel surcharges, partially offset by rate increases.

Operating income increased due to higher volume and revenue per package, partially offset by the net negative impact of fuel, increased network expansion costs and one fewer operating day. Operating margin decreased due to the net negative impact of fuel.

FedEx Freight Segment

For the first quarter, the FedEx Freight segment reported:

•

Revenue of $1.42 billion, up 2% from last year’s $1.40 billion

•

Operating income of $91 million, up 1% from $90 million a year ago

•

Operating margin of 6.4%, unchanged from 6.4% the previous year

Less-than-truckload (LTL) yield increased 1% due to FedEx Freight Economy and FedEx Freight Priority base yield improvement. LTL weight per shipment grew 1% due to heavier FedEx Freight Priority, while LTL average daily shipments increased 1% due to FedEx Freight Economy.

Operating income improved due to higher weight per shipment, yield and average daily shipments, overcoming the impact of one fewer operating day.

- more -

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $45 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 300,000 team members to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and first quarter fiscal 2014 Statistical Book. These materials, as well as a webcast of the earnings release conference call to be held at 8:30 a.m. EDT on September 18 are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our website following the call.

Certain statements in this press release may be considered forward-looking statements, such as statements relating to management’s views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, legal challenges or changes related to FedEx Ground’s owner-operators, our ability to execute on our business realignment program, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and filings with the SEC.

Media Contact: Jess Bunn 901-818-7463

Investor Contact: Mickey Foster 901-818-7468

Home Page: fedex.com

# # #

FEDEX CORP. FINANCIAL HIGHLIGHTS

First Quarter Fiscal 2014

(In millions, except earnings per share)

(Unaudited)


	Three Months Ended August 31
	2013			2012			%
Revenue:
FedEx Express segment	$	6,605		$	6,632			—
FedEx Ground segment		2,730			2,462			11	%
FedEx Freight segment		1,424			1,399			2	%
FedEx Services segment		375			389			(4	%)
Other & eliminations		(110	)		(90	)		22	%

Total Revenue		11,024			10,792			2	%

Operating Expenses:
Salaries and employee benefits		4,077			4,103			(1	%)
Purchased transportation		1,879			1,680			12	%
Rentals and landing fees		640			618			4	%
Depreciation and amortization		639			573			12	%
Fuel		1,104			1,138			(3	%)
Maintenance and repairs		480			542			(11	%)
Other		1,410			1,396			1	%

Total Operating Expenses		10,229			10,050			2	%

Operating Income:
FedEx Express segment		236			207			14	%
FedEx Ground segment		468			445			5	%
FedEx Freight segment		91			90			1	%

Total Operating Income		795			742			7	%

Other Income (Expense):
Interest, net		(27	)		(10	)		NM
Other, net		(2	)		(5	)		NM

Total Other Income (Expense)		(29	)		(15	)		NM

Income Before Income Taxes		766			727			5	%

Provision for Income Taxes		277			268			3	%

Net Income	$	489		$	459			7	%

Diluted Earnings Per Share	$	1.53		$	1.45			6	%

Weighted Average Common and Common Equivalent Shares		319			316			1	%

Capital Expenditures	$	572		$	972			(41	%)

FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS

First Quarter Fiscal 2014

(In millions)


	August 31, 2013 (Unaudited)			May 31, 2013
ASSETS

Current Assets
Cash and cash equivalents	$	5,096		$	4,917
Receivables, less allowances		4,990			5,044
Spare parts, supplies and fuel, less allowances		451			457
Deferred income taxes		604			533
Prepaid expenses and other		352			323

Total current assets		11,493			11,274

Property and Equipment, at Cost		38,167			38,109
Less accumulated depreciation and amortization		19,730			19,625

Net property and equipment		18,437			18,484

Other Long-Term Assets
Goodwill		2,712			2,755
Other assets		1,031			1,054

Total other long-term assets		3,743			3,809

	$	33,673		$	33,567

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

Current Liabilities
Current portion of long-term debt	$	254		$	251
Accrued salaries and employee benefits		1,366			1,688
Accounts payable		1,879			1,879
Accrued expenses		2,024			1,932

Total current liabilities		5,523			5,750

Long-Term Debt, Less Current Portion		2,739			2,739

Other Long-Term Liabilities
Deferred income taxes		1,820			1,652
Pension, postretirement healthcare and other benefit obligations		3,813			3,916
Self-insurance accruals		996			987
Deferred lease obligations		797			778
Deferred gains, principally related to aircraft transactions		221			227
Other liabilities		109			120

Total other long-term liabilities		7,756			7,680

Commitments and Contingencies

Common Stockholders’ Investment
Common stock, $0.10 par value, 800 million shares authorized		32			32
Additional paid-in capital		2,696			2,668
Retained earnings		18,913			18,519
Accumulated other comprehensive loss		(3,857	)		(3,820	)
Treasury stock, at cost		(129	)		(1	)

Total common stockholders’ investment		17,655			17,398

	$	33,673		$	33,567

FEDEX CORP. CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

First Quarter Fiscal 2014

(In millions)

(Unaudited)


	Three Months Ended August 31
	2013			2012
Operating Activities:
Net income	$	489		$	459
Noncash charges:
Depreciation and amortization		639			573
Other, net		171			209
Changes in operating assets and liabilities, net		(370	)		(338	)

Net cash provided by operating activities		929			903

Investing Activities:
Capital expenditures		(572	)		(972	)
Business acquisitions, net of cash acquired		—			(483	)
Proceeds from asset dispositions and other		10			12

Net cash used in investing activities		(562	)		(1,443	)

Financing Activities:
Principal payments on debt		—			(301	)
Proceeds from debt issuance		—			991
Dividends paid		(48	)		(44	)
Purchase of treasury stock		(278	)		(246	)
Other, net		145			25

Net cash (used in) provided by financing activities		(181	)		425

Effect of exchange rate changes on cash		(7	)		15

Net increase (decrease) in cash and cash equivalents		179			(100	)

Cash and cash equivalents at beginning of period		4,917			2,843

Cash and cash equivalents at end of period	$	5,096		$	2,743

FEDEX EXPRESS SEGMENT FINANCIAL HIGHLIGHTS

First Quarter Fiscal 2014

(Dollars in millions)

(Unaudited)


	Three Months Ended
	August 31
	2013			2012			%
Revenues:

Package Revenue:
U.S. Overnight Box	$	1,584		$	1,604			(1	%)
U.S. Overnight Envelope		419			430			(3	%)

Total U.S. Overnight		2,003			2,034			(2	%)
U.S. Deferred		729			702			4	%

Total U.S. Package Revenue		2,732			2,736			—

International Priority		1,576			1,661			(5	%)
International Economy		532			487			9	%

Total International Export Package		2,108			2,148			(2	%)
International Domestic¹		345			309			12	%

Total Package Revenue		5,185			5,193			—
Freight Revenue:
U.S.		624			610			2	%
International Priority		388			439			(12	%)
International Airfreight		54			74			(27	%)

Total Freight Revenue		1,066			1,123			(5	%)
Other Revenue²		354			316			12	%

Total Express Revenue	$	6,605		$	6,632			—

Operating Expenses:
Salaries and employee benefits		2,440			2,473			(1	%)
Purchased transportation		608			537			13	%
Rentals and landing fees		421			415			1	%
Depreciation and amortization		369			323			14	%
Fuel		956			986			(3	%)
Maintenance and repairs		307			372			(17	%)
Intercompany charges		495			537			(8	%)
Other		773			782			(1	%)

Total Operating Expenses		6,369			6,425			(1	%)

Operating Income	$	236		$	207			14	%

Operating Margin		3.6	%		3.1	%		0.5	pts

1 -	International Domestic includes international intra-country express operations, including acquisitions in Poland (June 2012), France (July 2012) and Brazil (July 2012).

2 -	Includes FedEx Trade Networks and FedEx SupplyChain Systems.

FEDEX EXPRESS SEGMENT OPERATING HIGHLIGHTS

First Quarter Fiscal 2014

(Unaudited)


	Three Months Ended
	August 31
	2013		2012		%
PACKAGE STATISTICS¹
Average Daily Package Volume (000s):
U.S. Overnight Box		1,112		1,092		2	%
U.S. Overnight Envelope		563		575		(2	%)

Total U.S. Overnight Package		1,675		1,667		—
U.S. Deferred		790		762		4	%

Total U.S. Domestic Package		2,465		2,429		1	%

International Priority		406		408		—
International Economy		165		143		15	%

Total International Export Package		571		551		4	%
International Domestic²		789		681		16	%

Total Average Daily Packages		3,825		3,661		4	%

Yield (Revenue Per Package):
U.S. Overnight Box	$	22.27	$	22.59		(1	%)
U.S. Overnight Envelope		11.61		11.51		1	%

U.S. Overnight Composite		18.68		18.77		—
U.S. Deferred		14.42		14.17		2	%

U.S. Domestic Composite		17.32		17.33		—

International Priority		60.65		62.68		(3	%)
International Economy		50.41		52.17		(3	%)

Total International Export Composite		57.70		59.94		(4	%)
International Domestic²		6.84		7.00		(2	%)

Composite Package Yield	$	21.18	$	21.82		(3	%)

FREIGHT STATISTICS
Average Daily Freight Pounds (000s):
U.S.		7,423		7,077		5	%
International Priority		2,862		3,184		(10	%)
International Airfreight		850		1,104		(23	%)

Total Avg Daily Freight Pounds		11,135		11,365		(2	%)

Revenue Per Freight Pound:
U.S.	$	1.31	$	1.33		(2	%)
International Priority		2.12		2.12		—
International Airfreight		0.99		1.03		(4	%)

Composite Freight Yield	$	1.50	$	1.52		(1	%)

Operating Weekdays		64		65		(2	%)

1 -	Package and freight statistics include only the operations of FedEx Express.

2 -	International Domestic includes international intra-country express operations, including acquisitions in Poland (June 2012), France (July 2012) and Brazil (July 2012).

FEDEX GROUND SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

First Quarter Fiscal 2014

(Dollars in millions)

(Unaudited)


	Three Months Ended
	August 31
	2013			2012			%
FINANCIAL HIGHLIGHTS

Revenues:
FedEx Ground	$	2,506		$	2,273			10	%
FedEx SmartPost		224			189			19	%

Total Revenues		2,730			2,462			11	%

Operating Expenses:
Salaries and employee benefits		414			377			10	%
Purchased transportation		1,064			946			12	%
Rentals		92			74			24	%
Depreciation and amortization		111			103			8	%
Fuel		3			3			—
Maintenance and repairs		53			46			15	%
Intercompany charges		285			262			9	%
Other		240			206			17	%

Total Operating Expenses		2,262			2,017			12	%

Operating Income	$	468		$	445			5	%

Operating Margin		17.1	%		18.1	%		(1.0	pts)

OPERATING STATISTICS

Operating Weekdays		64			65			(2	%)

Average Daily Package Volume (000s)
FedEx Ground		4,313			3,898			11	%
FedEx SmartPost		2,092			1,664			26	%

Yield (Revenue Per Package)
FedEx Ground	$	9.05		$	8.94			1	%
FedEx SmartPost	$	1.67		$	1.75			(5	%)

FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

First Quarter Fiscal 2014

(Dollars in millions)

(Unaudited)


	Three Months Ended August 31
	2013			2012			%
FINANCIAL HIGHLIGHTS

Revenue	$	1,424		$	1,399			2	%

Operating Expenses:
Salaries and employee benefits		598			599			—
Purchased transportation		234			226			4	%
Rentals		32			29			10	%
Depreciation and amortization		57			53			8	%
Fuel		145			148			(2	%)
Maintenance and repairs		46			48			(4	%)
Intercompany charges		121			111			9	%
Other		100			95			5	%

Total Operating Expenses		1,333			1,309			2	%

Operating Income	$	91		$	90			1	%

Operating Margin		6.4	%		6.4	%		—

OPERATING STATISTICS

LTL Operating Weekdays		64			65			(2	%)

Average Daily LTL Shipments (000s)
Priority		61.1			61.4			—
Economy		27.6			26.6			4	%

Total Average Daily LTL Shipments		88.7			88.0			1	%

Weight Per LTL Shipment (lbs)
Priority		1,244			1,215			2	%
Economy		993			999			(1	%)

Composite Weight Per LTL Shipment		1,166			1,150			1	%

LTL Yield (Revenue/CWT)
Priority	$	17.88		$	17.73			1	%
Economy		25.84			25.33			2	%

Composite LTL Yield	$	19.99		$	19.72			1	%

FEDEX CORP - FORM 8-K - EX-99.1 - September 18, 2013

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